KPMG coal long service leave review reveals major problems, recommends overhaul of the board among other changes

Although consultants KPMG found the scheme worked for most permanent coalminers, it found a range of problems - including the treatment of casual coalminers - and its 20 recommendations cover the treatment and coverage of employees, compliance and enforcement, governance and administrative processes.

The 140-page review by KPMG was ordered by the government in June last year and was made public yesterday just as Coal Mining Industry (Long Service Leave Funding) Corporation executives were about to front a Senate estimates hearing.

IN THE NEWS:

The federal government issued a 22-page response soon afterwards saying it accepted the 10 recommendations addressed to it and supported the other 10 recommendations, saying it found "the evidence and analysis outlined in the report persuasive".

Coal LSL - the Australian Government corporation established to regulate and manage long service leave entitlements on behalf of employees and employers - said on Thursday morning that it welcomed the report and would begin to work through the detail of the recommendations.

The government ordered the review after continued lobbying from One Nation Senator Malcolm Roberts, who had used Senate estimates to raise concerns with Coal LSL arising from his work with disaffected Hunter Region coalminers including injured former Mount Arthur labour hire employee Simon Turner.

Both welcomed the findings last night.

The review said that despite some calls to abolish the corporation, KPMG believed that "a number of pressing issues" could be addressed by legislative reform and other changes to improve the scheme's performance in the short to medium term.

It found that at least some of Coal LSL's problems including under-reporting of casual mineworkers' hours were "exacerbated by the current legislation".

The review gave three options for reform - interim, targeted and structural - but said only the third option addressed all 20 areas identified.

"Consistent with stakeholder feedback", KPMG identified the potential for "conflicts of interest" as "a result of the appointment of industry representatives" (union and employer) to the Coal LSL board.

It said the six person board should be expanded to seven or eight and that "approximately 20 per cent" of the board should be independent directors. It pointed to an independent chair as "best practice" governance.

The review said that while the corporation and the CFMEU suggested "many employers and employer" were "content" with the scheme, various other stakeholders were not.

Although the scheme had more than $2.1 billion under management and returned 17 per cent on its investments in the 2020-21 financial year, it found the "reimbursement model" - whereby employers pay a 2 per cent payroll levy, and the direct costs of employees' long service leave, which they are repaid by Coal LSL - provided "little in the way of transparency" and recommended an "authority pays" model, in which Coal LSL would pay employees directly.

(Although the government said yesterday it supported all of the recommendations, the detailed response only "notes" this recommendation.)

Some employers told the review they found Coal LSL difficult, "inconsistent" and "highly litigious" to deal with. KPMG said it received "numerous examples" of delayed communications of up to four years duration in instances were disputing a need to pay into the scheme.

KPMG recommended the corporation review its approach to compliance, enforcement and communications to position itself as a "trusted custodian".

It also recommended changes to "safeguard against fraud (including the under-reporting of hours)" worked by employees, including the publication of the corporation's "fraud control measures".

It investigated allegations of serious fraud but "contrary to some suggestions proffered in the public domain", found "no evidence of money laundering within the scheme, the involvement of criminal organisations or systemic mismanagement of funds by the corporation".

It did, however, say that the complexity of the scheme and its administrative processes made it "vulnerable to the potential for both unintentional and intentional under-reporting of hours worked by eligible employees".

In its response, the government said "legislative reforms around coverage and eligibility issues" would "make significant steps towards providing certainty and fairness".

One Nation's support of Coalition legislation generated as response to "casual" work class actions caused a breach between Senator Roberts and the Hunter mineworkers he had publicly supported, but Mr Turner thanked him last night for his efforts and said "I feel we are both vindicated".

"I'm very pleased with the report and its 20 recommendations, they aligned with the issues I constantly raised for many years," Mr Turner said.

"The CFMEU constantly denied there were any problems.

"My employment was covered by the Black Coal Mining Industry award which does not allow casual employment, I worked full-time hours and roster Coal LSL was accepting a levy from an illegal wage and held under reported hours on my record and recorded as a casual.

"I'm very relieved with this outcome."

Mr Turner said that whoever won the forthcoming federal election "must implement the changes".

EARLIER HERALD COVERAGE:

Senator Roberts said the report highlighted the conflicts of interest inherent in a Coal LSL board dominated by the CFMEU and the minerals council.

"When I raised the issue the Hunter Valley CFMEU misrepresented my work and my claims in an apparent attempt to stop me exposing the issue," Senator Robert said.

"Fortunately with the help of coal miners and a labour-hire firm concerned with unscrupulous labour-hire firms tarnishing the industry, we managed to prevail and get the issues exposed.

"In fact, the helpful labour-hire firm was instrumental in assisting us with holding Coal LSL accountable and with getting one miner a substantial payment from his previous unscrupulous labour-hire employer."

Our journalists work hard to provide local, up-to-date news to the community. This is how you can continue to access our trusted content: